Small businesses seek city's help with high rents

POWAY -- As a growing number of local shopping centers get
remodeled, more and more of the city's small-business owners say
they're feeling sticker shock when their post-renovation rents and
related costs jump.

Toni Kraft, president and chief executive officer of the Poway
Chamber of Commerce, said last week that numerous small-business
owners had recently sought the chamber's help with the problem of
escalating rents.

Faced with the same problem itself, the chamber is considering a
move from the Poway Plaza shopping center at Poway and Community
roads, she said.

In the meantime, Kraft said, the chamber is helping tenants
facing higher rents because of renovations by encouraging them to
review their leases and meet with attorneys for advice. The chamber
is also trying to come up with joint advertising and similar
efforts to help the businesses cut their costs or increase their
profits, which in turn would make the rent increases easier to
handle, Kraft said.

The chamber also has asked city officials to get involved.

"We approached them and said, 'Look, this is our dilemma; what
do you as a city have to offer?' " said Kraft.

On Friday, Mayor Mickey Cafagna said officials are considering
creating a program that would offer small businesses money to help
cover their higher costs. Creating a place where small businesses
could temporarily move during major renovation projects, so they
could operate without disruptions, is also being considered,
Cafagna said.

Helping mom and pop

The affected businesses are turning to the city for help because
many of the shopping center remodeling jobs -- including the one at
Poway Plaza -- are being carried out with financial help from the
city, Kraft said. Known as the commercial rehabilitation loan
program, the assistance is designed to motivate the owners of aging
or dilapidated commercial properties to fix them up.

The Lively Center, the Poway Library Plaza and the Carriage
Plaza Center are among the local shopping centers that have been
fixed up with the loan program's help. All those properties are on
Poway Road.

"Landlords are great to step up to the plate," Kraft said,
referring to the call for renovations. "(But) let's not forget the
people who got them there in the first place -- the mom and pop
shops, the bread shops and so on."

In the case of the chamber, the organization is five years into
a six-year lease on office space in the Poway Plaza center, an
L-shaped strip mall nearing the end of a $3 million renovation. The
company that manages the property recently notified the chamber
that both its rent and costs shared by tenants and the property
owner -- insurance, common-area repairs, property taxes -- would be
going up, Kraft said.

While Kraft said she understood the reason for the increases,
she said the hikes will be hard on the nonprofit chamber's
budget.

Step Stone Management Co. manages the plaza. A message left
Friday afternoon for Jason Dick, whom Poway Plaza tenants
identified as their contact at the company, was not immediately
returned.

Inevitable downside of gains

The problem of escalating rents has put the city in an interesting
position because it has pushed the rehabilitation loan program for
more than five years. City officials also have actively pursued
regional and national chains to open stores in Poway.

Both efforts have enjoyed a reasonable amount of success.

Owners of at least half a dozen older shopping centers and
businesses in Poway have remodeled by using a city commercial
rehabilitation loan, which is forgivable over a five-year
period.

Chain stores that have opened in Poway in the past few years
include Costco, Home Depot, Kohls, Stein Mart, Office Depot and
Staples. The city's sales tax revenues have gone up significantly
as a result.

But the downside of the twin recruitment efforts became clear
when Poway began losing some of its long-time small businesses.
Owners of those businesses said higher rents and related costs had
forced them to close or relocate to centers that have lower
profiles or have not been remodeled. Small, family-run restaurants
and stores and service-oriented businesses such as tailor shops,
shoe shops and dry cleaning outlets were among the affected
businesses.

The cry for the city to do something first arose in late 2004,
when Cully's Restaurant was evicted from its longtime home in the
Carriage Plaza Center on Poway Road.

Helping "heritage" businesses

The property's manager attributed the eviction to the center
owner's desire to bring in a new restaurant after the plaza was
remodeled with the city's help. Cully's plight became an issue in
the 2004 City Council race.

The restaurant ended up reopening in the Poway Library Plaza a
short distance away on Poway Road, which is home to the city's main
commercial district, last year. Even so, Councilman Bob Emery
brought the issue of remodeling jobs' effect on small businesses to
the council, which agreed the city should explore potential ways to
help those businesses.

The idea of the proposed program grew out of that request. The
council's Economic Development Committee, which includes the mayor
and Councilwoman Betty Rexford, is working on the proposal.

Edwards, the economic development manager, said the retention
program would likely include several levels of financial assistance
to small businesses affected by remodeling projects carried out
with city help. While the committee has not yet figured out how it
will decide which businesses to help, those deemed to be "heritage"
ones would probably be at the top of the list, he said.

Cafagna said longtime businesses that offer tailoring, shoe
repair and other important services might fall into the "heritage"
category.

"That (program) will hopefully provide some kind of subsidy to
maybe help those businesses retain their space," the mayor
said.

Temporary relocation a possibility

Cafagna also said the city might create a place where small
businesses could temporarily relocate while their centers are
renovated. The businesses would have to lease the temporary space,
which might be a city-owned site, but doing so would enable them to
escape the construction that can drive away customers.

Laura Worley, co-owner of a 9-month-old dry cleaning business
that has seen its customers all but disappear since the Poway Plaza
remodeling project got under way, said she and her husband Steve
would welcome any city assistance. Although their landlords gave
them a small break on their rent to offset construction-related
problems, the assistance has not been enough, Worley said.

"(City help) would be wonderful," she said. "It would really
make a difference to new businesses like ours who are new but
aren't getting a lot of help."

In the meantime, Kraft said, the chamber is advising
small-business owners to review their landlord-tenant paperwork
carefully. The chamber can also hook up members with attorneys and
other resources that can help a business owner evaluate whether
moving is an option or financially beneficial in the long run, she
said.

"A lot of it boils down to going to that No. 1 document that you
have in your file cabinet -- reviewing your lease, understanding
what it says, understanding what your options are," Kraft said.
"And looking down the pike and saying, 'OK, where am I going to be
two years down the road from here?' "